How markets work: bid, ask and spread
Every price you see is the meeting point of buyers and sellers. Learn the words before the strategies.
What it is
Prices move because orders arrive. Buyers post a bid (the most they will pay) and sellers post an ask (the least they will accept). The gap between them is the spread. When a buyer is impatient they pay the ask; when a seller is impatient they hit the bid. That aggressive side is what pushes price.
Liquid markets (major crypto, large stocks, major forex pairs, gold, index futures) have tight spreads and deep books, so you can enter and exit with little slippage. Thin markets (small-cap coins, penny stocks) have wide spreads and can jump past your stop.
How to use it
- Pick liquid instruments first: tight spread, high volume.
- Know the cost of every trade: spread + fee + slippage.
- Prefer limit orders when you are not in a hurry; use market orders when speed matters.
- Check spread and volume before you trust any chart pattern.
Common mistakes
- Trading thin coins or stocks with huge spreads, then blaming the strategy.
- Ignoring fees: a 0.1% round-trip fee needs a bigger target on a 0.3% scalp.
- Assuming your stop fills at the exact price you set.
Practise it in TradeDesk X
Micro and the scanner show 24-hour volume and use only liquid markets for automatic trades. The Micro order book panel displays the live spread in basis points.
Related lessons
Order types: market, limit, stop and take-profit
The tool you choose decides your price, your speed and whether you get filled.
🌊Reading the order book
Resting buy and sell orders at each price. Useful for scalping, easy to misread.